Red Lobster ups spread on $375 million term loan to Libor plus 525 bps

By Sara Rosenberg

New York, July 9 – Red Lobster Management LLC increased pricing on its $375 million seven-year covenant-light term loan B to Libor plus 525 basis points from talk of Libor plus 475 bps to 500 bps, according to a market source.

Also, the original issue discount on the term loan was changed to 98 from 99 and the 101 soft call protection was extended to one year from six months, the source said.

The term loan still has a 1% Libor floor.

Other changes made included decreasing the free and clear accordion to $50 million from $100 million and revising the unlimited prong to 2.25 times first-lien leverage from 2.5 times, the source continued.

Furthermore, the starting excess cash flow sweep was modified to 75% from 50%.

The company’s $425 million credit facility (B3/B) also includes a $50 million revolver.

Recommitments are due at noon ET on Thursday, the source added.

Deutsche Bank Securities Inc., GE Capital Markets and Jefferies Finance LLC are leading the debt.

Proceeds will be used to help fund the buyout of the company by Golden Gate Capital from Darden Restaurants Inc. for $2.1 billion in cash.

Other funds for the transaction will come from a fully executed $1.5 billion sale-leaseback agreement with American Realty Capital Properties Inc.

Closing is expected in Darden’s first fiscal quarter of 2015, subject to customary conditions and regulatory approvals. The transaction is not subject to shareholder approval or financing.

Red Lobster is an Orlando, Fla.-based casual dining seafood restaurant company.

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